Robert McKellar
Tree Frog:
A lot has changed in the six months since you wrote about political risk management in the Canadian forest products sector. In the media and thus the Tree Frog News, we’ve been hearing a lot about US lumber duties and tariffs and their potential impact on both sides of the border. But before we talk about that, can you comment on what’s changed from a political risk perspective?
Harmattan:
Back in August 2024, I pointed out that the sector had long enjoyed stability, largely because Canada’s primary market—the US—had been open, rational, and predictable. That sense of stability was rooted in a belief that even occasional trade disputes were manageable within a predictable framework. But as we noted then, political risk is not just about places, but also about periods, and things can change even in places we’re very used to. And yes, since that time, we’ve witnessed a dramatic evolution. …President Trump is now a critical variable in the fortunes of Canadian companies in the US, and indeed a major factor in the evolution of the international system. Getting a sense of the man and what he means is probably the most direct route to contextual insight for what follows. I’m not an expert on Trump or even US politics. But like most political risk consultants, I have been fascinated by his rise and character, and have kept an eye on the more discerning observations. What follows is a brief sketch.
WASHINGTON — President Trump is taking a blowtorch to the rules that have governed world trade for decades. The 
U.S. President Donald Trump in an all-caps post on Truth Social Thursday teased a new round of sweeping reciprocal tariffs, matching the higher rates other nations charge to import American goods. …Reciprocal tariffs were one of Trump’s core campaign pledges — his method for evening the score with foreign nations that place taxes on American goods and to solve what he has said are unfair trade practices. …He is set to share more details on the tariffs ahead of his visit with Indian Prime Minister Narendra Modi, White House press secretary Karoline Leavitt told reporters on Wednesday. …The tariffs are likely to hit developing countries hardest, especially India, Brazil, Vietnam and other Southeast Asian and African countries, given that they have some of the widest differences in tariff rates charged on U.S. goods brought into their countries compared to what the U.S. charges them.
Reciprocal tariffs are straightforward in theory: The U.S. would pose the same levies on imported goods from a given country that the other country imposes on their U.S. imports. But it gets far murkier in practice, as countries often charge different tariffs on different classes of goods. Goldman Sachs economists outlined three approaches Trump could take. “Country-level reciprocity” is the “simplest” strategy which would have the U.S. impose the same average tariffs. “Product-level reciprocity by country” would have the U.S. place marching tariffs on a good-by-good basis by trading partner.” Reciprocity including non-tariff barriers” is the “most difficult” approach as it would encompass a complicated web of inputs including inspection fees and value-added taxes. …4.8% is the U.S.’ weighted average tariff rate if Trump implemented the country-level strategy. …Goods from the 20 countries the U.S. has free trade agreements with, including Australia, Canada, Mexico and Panama, won’t be affected – though Trump has targeted several of those countries in recent weeks.
NEW YORK — Mercer International reported fourth quarter 2024 net income of $16.7 million compared to a net loss of $87.2 million in the fourth quarter of 2023 and a net loss of $17.6 million in the third quarter of 2024. Q4 revenues were $488 million, down from $502 million in Q3, 2024 but up from $470 million in Q4, 2023. Mr. Juan Carlos Bueno, CEO, stated: “In the fourth quarter of 2024, softwood pulp prices remained strong, decreasing slightly from recent record prices.” …Hardwood pulp prices in China and North America decreased in the fourth quarter of 2024 as the market absorbed capacity increases from earlier in the year. …Lumber sales realizations increased, driven by modestly higher prices in the U.S. market, while in Europe, prices remained stable. 
Japan’s timber industry is seeing notable changes, with predictions of a drop in log imports and varying trends in lumber imports. These shifts are influenced by economic factors, environmental concerns, and policy decisions affecting how Japan uses timber. The Japan Lumber Importers Association has shared its predictions for wood imports, expecting a 13% decrease in log imports for 2024. …While log imports are expected to decline, the situation with lumber imports is more complex. In 2024, lumber imports are projected to increase by 17.2%. However, in the first half of 2025, a 12.5% decrease is expected compared to the same period the previous year. Several factors influence these mixed trends… Japan’s housing starts decreased by 4.6% year-over-year in 2023, with owner-occupied housing falling by 11.4%. These changes directly impact the demand for lumber, influencing import volumes.
High Point, N.C. — After a successful first year, British Columbia wood expert 
The cement industry is at a crossroads as decarbonization is expected to take its toll, resulting in a significant decline in demand, according to a paper by the World Cement Association (WCA). “The cement industry is undergoing an unprecedented transformation,” explains WCA CEO Ian Riley. “As we move towards a decarbonized future, understanding the true demand for cement is critical to ensuring that policies, technologies and investments align with reality.” The white paper examines disruptive factors such as alternative materials. …The report challenges prevailing forecasts and projects demand for cement and clinker will dip, mainly due to the rise of timber, greater use of admixtures, the move towards decarbonization of the industry as well as design practices that will reduce the concrete used. ..According to the paper, timber has replaced concrete and steel in many highrise buildings but limitations on the supply of timber are expected to curb its growth.
Polarization is gripping the country and the centre isn’t holding, Environment and Climate Change Canada found when setting the country’s latest emissions reduction target. The department solicited feedback… to determine what Canada’s internationally binding 2035 pollution reduction obligations should be. …The results found that overcoming polarization is a major hurdle to implementing aggressive emissions reductions that climate scientists say is required to avoid catastrophic warming. About two-thirds of Canadians who participated support stronger measures to address climate change. “There was little middle ground, and very few people were satisfied with the status quo,” according to the findings. …When asked if the federal government is doing enough to fight climate change, 47% believe Canada needs to do more, compared to 36% that feel existing measures go too far. …Polarization is gripping the country and the centre isn’t holding, Environment and Climate Change Canada found when setting the country’s latest emissions reduction target.
Norwegian forestry companies are making history by revolutionizing how timber is transported. Beginning in 2027, Viken AT Market and AT Skog will be the first in the forestry industry to ship timber on zero-emission vessels—a game-changing move that signals a dramatic shift toward sustainable maritime logistics. This breakthrough is made possible through a partnership with Skarv Shipping, which will provide vessels powered by ammonia and electricity, significantly reducing emissions compared to conventional diesel-powered ships. Norway’s timber industry plays a crucial role in the country’s economy, exporting approximately 1 million tons of timber annually to European markets. However, most of this transport has relied on traditional diesel-powered vessels, which contribute to greenhouse gas emissions. In an effort to push the industry forward, Viken AT Market is committing to zero-emission transport, securing a long-term shipping agreement with Skarv Shipping and Arriva Shipping.
In December 2024, Drax and Pathway Energy announced a multiyear deal that could see Drax supplying upward of 1 million metric tons of wood pellets to Pathway’s currently proposed sustainable aviation fuel (SAF) plant on the U.S. Gulf Coast. In the months leading up to the announcement, Drax had hinted at such prospects, indicating plans to develop a pipeline of biomass sales opportunities in North America, including in the SAF market. Drax CEO Will Gardiner confirmed as much during a November quarterly earnings call. Currently, Drax has 17 operational wood pellet production plants across North America and a 450,000-metric-ton facility under construction in Longview, Washington. While Drax is well known in the industrial wood pellet industry, Pathway Energy is a new and unique market participant. Pellet Mill Magazine interviewed Pathway Energy CEO Steve Roberts to introduce the company, technology and plans.
Turkey is poor in oil and gas while its renewable energy sector is heavily reliant on a mix of hydro, wind and solar. But another element is heating up: biofuel – fuel derived directly from biomass, such as wood or plant matter – is gaining interest domestically and creating an export market not available to other renewables. Demand for and output of biomass pellets used in stoves, furnaces and heaters as an alternative to coal or wood to cope with Turkey’s often freezing winters have increased in recent years. Produced by crushing and compressing wood waste, the pellets have a higher per-kilo energy output than gas, coal or oil, and far lower emission levels, according to promoters. Studies estimate Turkey has the raw material to produce up to 1.8 million tonnes of pellets annually, although installed processing capacity has yet to reach this level.
MORIOKA, JAPAN — One person has died, and more than 80 homes appear to have burned down after a wildfire broke out in a northeastern Japan city, local authorities said Thursday, as the region faced its third fire in about a week. Since Wednesday, the blaze has scorched more than 600 hectares in Ofunato, Iwate Prefecture, the municipal government said. With the fire still spreading, about 3,300 residents have been ordered to evacuate. Firefighters battled the blaze through the night, while helicopters were deployed in the morning to contain it from the air. The Fire and Disaster Management Agency requested emergency support from firefighting departments in eight nearby prefectures, and they sent about 690 personnel combined. …Efforts to contain the blaze Wednesday were carried out at ground level as the strong winds precluded waterbombing by helicopters. When the latest fire broke out, strong wind and dry air warnings were in place in the area.